Staples to Shut 60 Stores in Plan to Save $250 Million

Staples Inc. said it will use the savings from the changes to integrate its Internet and retail offering and increase investment the online operations. Photographer: Tim Boyle/Bloomberg

Sept. 25 (Bloomberg) -- Staples Inc., the largest U.S.
office supplies chain, plans to shut 45 locations in Europe and
accelerate the closing of 15 stores in the U.S. as part of a
plan to save about $250 million a year.

The closings, the impairment of goodwill in the European
business and other actions will result in total pretax charges
of as much as $1.12 billion in the fiscal year ending in
January, Framingham, Massachusetts-based Staples said today in a
statement. The pretax savings will be generated by the end of
fiscal 2015, the company said.

Chief Executive Officer Ronald Sargent has posted sales
declines in the past two quarters as workers shift to using
fewer traditional office products, such as pens and folders. The
retailer also has been hurt by slower job creation amid the
recession in Europe and high unemployment in the U.S.

“The office supply business has been under pressure for
really the past several years since the recession,” Joe
Feldman, a New York-based analyst at Telsey Advisory Group, said
in an interview. “It’s reliant on economic growth and small
business formation, and we’ve seen a lack of both.”

The shares fell 4.5 percent to $11.80 at the close in New
York, the biggest drop since Aug. 15. Staples has lost 15
percent this year.

Staples, the world’s second-largest Internet retailer, said
it will use the savings to increase investment in the online
operations. The company operated 2,295 stores as of Jan. 28,
including 1,583 in the U.S. and 331 in Europe, according to a
securities filing.

Internet Shift

“A lot of purchasing has now shifted toward the Internet
and mobile purchasing,” Feldman said. If the industry continues
morphing into an online and direct business, “then you need
fewer” brick-and-mortar stores, he said.

Other office-supply retailers have been trying to cut costs
by shrinking store square footage and possibly shutting
locations. Office Depot Inc. will announce a plan in October
that may include closing some of its 1,680 units, Kevin Peters,
North American retail president, said earlier this month.

Last week, Starboard Value LP became Boca Raton, Florida-based Office Depot’s largest shareholder and started pushing for
changes to turn around earnings and four straight years of sales
declines.

Staples also said it is pursuing the sale of its European
printing systems business and will count the unit as a
discontinued operation as of the third quarter.

Buyout Interest

Fortune reported earlier this month that private-equity
firms have been considering buying Staples. The talks are
preliminary and an offer wouldn’t be made until late this year,
the magazine said.

Potential buyers need time to arrange financing and don’t
want the public-relations challenges of buying a business
associated with Republican presidential nominee Mitt Romney’s
Bain Capital LLC, which was an earlier investor in Staples,
during the campaign season, Fortune said.

Staples said it plans to return more than $1 billion in
cash to shareholders through dividends and share buybacks in its
fiscal 2012.